The value of stock of one of the major operators of private prisons recently dropped 16%.
The stock decline happened after major institutions placed a moratorium on financing private detention facilities. A number of agencies have also sold-off private prison stock.
In March, JP Morgan announced “We will no longer bank the private prison industry,” reported Newsweek.
In a 2018 Business Standards Report, Wells Fargo Bank told industry analysts, “Our credit exposure to private prison companies has significantly decreased and is expected to continue to decline, [as] we are not actively marketing to that sector.”
The moratorium worried investors in GEO Group. They then raised questions about the reported mistreatment of detainees in their detention facilities.
The company’s annual SEC filing included a statement which read, “The management and operation of correctional, detention and community- based facilities under public- private partnerships has not achieved complete acceptance by either government agencies or the public,’ reported Asher Stockler of Newsweek.
GEO Group’s website and SEC filings reveal the company manages 75,000 beds throughout the country, creating first-quarter 2019 revenues greater than $610 million.
GEO and CoreCivic had California inmates in private prisons in states such as Ari- zona, Mississippi and Arkansas, besides housing state inmates in at least six facilities in California.
New contracts, such as a 10-year contract with the U.S. Marshals Service for a detention facility in Queens, N.Y., generated revenue growth of 10%, Newsweek reported.
In spite of the growth, the company is warning investors that growing public pressure to divest from the private prison industry “could have a material adverse effect on our business,” the magazine reported.
The adverse effect forecast- ed by the companies could include the loss of bank loans for basic operational and expansion costs. The companies have borrowed up to 90% of their total cash holdings, according to an article published earlier this year in the San Quentin News.